Today I’d like to offer a simple explanation for how life insurance “works.” This discussion will also lay a foundation for discussing the difference between term and permanent life insurance. The first post in this series, on the reasons someone might need life insurance, is worth reading if you’re not sure whether you need life insurance.

Suppose that you’re a 20-year old male and you’ve decided that you need some life insurance. For the purpose of this illustration, let’s assume you’ve determined that you need $1,000,000 in coverage for an indefinite period of time. Let’s also assume that you …